In an effort to boost the economy, the Federal Inland Revenue Service, FIRS, has announced the commencement of the implementation of the withholding tax system.
In a statement yesterday, Collins Omokaro, Special Adviser to the Executive Chairman of the FIRS on Communication and Advocacy, stated that the system would streamline tax collection, enhance compliance and increase revenue for critical sectors.
While outlining the objectives of the new regulation, the FIRS explained that the initiative was designed to ensure that taxes were collected efficiently and transparently, fostering accountability among businesses and employers.
It said the regulation mandated the deduction of taxes directly from payments such as salaries, rent, professional fees and dividends.
By placing the responsibility on businesses, employers, and other payers to withhold taxes at the point of payment, the agency aims to ensure a steady inflow of revenue and minimise tax evasion.
The FIRS also emphasised that key measures of the regulation included the integration of Tax Identification Numbers, TINs, with transactions and the establishment of penalties for non-compliance.
The agency further explained that adjustments to tax rates for both residents and non-residents were intended to support local businesses, while ensuring fairness for foreign entities.
The FIRS projected that this initiative will create a more equitable tax system, where individuals and businesses contribute their fair share to national development.
The agency noted that the anticipated increase in revenue was expected to fund essential public services, stimulate economic growth and enhance the quality of life for Nigerians.
Despite the potential benefits, the FIRS acknowledged that the implementation of the new regulation posed challenges.
The agency warned that businesses might need to invest in software and training to accurately deduct and remit taxes.
According to the FIRS, small enterprises and vendors may inadvertently face non-compliance due to a lack of awareness, and sectors such as gaming and telecommunications will also need to adapt to unique tax obligations under the new rules.
However, the FIRS contended that effective implementation and cooperation among all stakeholders will be crucial for success.
Omokaro said: “The new regulation is a game-changer for Nigeria’s tax landscape. It will ensure that taxes are collected efficiently and transparently while fostering accountability among businesses and employers.
“By placing the responsibility on businesses, employers, and other payers to withhold taxes at the point of payment, the government hopes to ensure a steady revenue inflow and minimise tax evasion.
“This initiative is expected to create a more equitable tax system where individuals and businesses contribute their fair share to national development.
“However, government agencies must intensify awareness campaigns to help businesses, especially small and medium enterprises, navigate the changes smoothly. The introduction of this regulation comes with high expectations.”
(Vanguard)
